Mark L. Tuft is a partner with Cooper, White & Cooper LLP, in San Francisco, where he specializes in representing attorneys and law firms on professional responsibility and liability matters. He is a vice chair of the California State Bar Committee for the Revision of the Rules of Professional Conduct and is an adjunct professor at the University of San Francisco School of Law, where he teaches legal ethics. His is also a co-author of the California Practice Guide on Professional Responsibility. He may be reached at mtuft@cwclaw.com.

Practicing law in an increasing electronic environment invariably will raise ethical issues that may not be readily answered under existing ethics rules. Resolving ethical issues in this context requires more than simply keeping up with emerging technology. The challenge for lawyers is to be able to apply the more slowly evolving ethics rules in an era of rapidly developing technology in order to satisfy their professional responsibilities to clients and to others.

Mananging Electronic Information

An obvious challenge will be to manage electronic information that belongs to clients and to the law firm itself. E-mail, the Internet, and a growing set of portable digital devices have become commonplace elements of the practice of law and in the business world of clients. Innovative and complex procedures are emerging for finding, preserving, and producing data and electronic files. In response to these developing technologies, law firms will need systems that allow for the proper storage, retrieval, and accountability of e-data.

A lawyer’s duties of competence and diligence could take on a new meaning as the practice of law becomes increasingly paperless. Competent representation requires more than legal knowledge. It also requires the skill, thoroughness, and preparation reasonably necessary for the representation. This includes the use of methods and procedures meeting the standards of competent practitioners as well as keeping abreast of changes in the law and its practices (ABA Model Rule 1.1 and Comments 5 and 6).

Electronic filing and e-discovery have become facts of life. Case law and recent amendments to the Federal Rules of Civil Procedure (FRCP) impose an obligation on lawyers to account to opposing parties and to the court for discoverable electronic data (see Zubulake v. UBS Warburg, 382 F.Supp.2d 536 (S.D.N.Y. 2005); Fed.R.Civ.P. 26(f)). Failure to meet these new standards can lead to disastrous results (see, e.g., Phoenix Four v. Strategic Resources, 2006 U.S. Dist. LEXIS 32211 (S.D.N.Y. 2006)). FRCP 26(f) imposes a duty on counsel to engage in pretrial discovery responsibly and to resolve e-discovery issues early in the case. Model Rule 1.3 requires that lawyers act with reasonable diligence and promptness in representing clients. Lawyers will have to become more proactive in preserving client data, even before litigation begins. Lawyers will also need to coordinate searches, produce electronic information in a usable form, manage costs, and avoid privilege waivers. A lawyer may not unlawfully obstruct another party’s access to evidence or unlawfully alter, destroy, or conceal a document or other material having potential evidentiary value. Nor may a lawyer counsel another person to do any such act (Model Rule 3.4(a)). A lawyer is obligated under FRCP 26(g)(2) to certify that a discovery request, response, or objection the lawyer signs complies with existing law or is a good-faith argument for an extension, modification, or reversal of existing law and is not being made for any improper purpose. State rules regarding e-filing and e-discovery will not be far behind.

In light of these new developments, familiarity with the client’s and the law firm’s electronic data systems, storage, retrieval, archiving, and retention policies and practices could likely be viewed as standards of competent representation. Relying on the client or IT consultants to establish procedures for tracking, preserving, and producing the growing proliferation of digital information will not be sufficient. Lawyers are already required to coordinate their clients’ discovery efforts and survey electronically stored information sources. Lawyers will need to be able to counsel clients on the proper systems to have in place to preserve and produce required information. Competent representation may also require lawyers to advise clients on how e-data, including metadata and e-mails, can be properly destroyed and when electronic information must be preserved under a litigation hold. Failure to properly advise clients could lead to allegations of spoliation or failure to comply with e-discovery rules and court discovery orders. This could result in sanctions, including monetary fines, adverse inference instructions, or entry of default judgments.

Lawyers have an ethical obligation to reasonably consult with each client about the means by which the client’s objectives of the representation are to be accomplished (Model Rules 1.2(a) and 1.4(a)(2)). As the use of technology increases, clients will have even more reason to rely on their attorneys for advice with respect to managing electronic information and discovery obligations.

A lawyer representing an organization is required to proceed as is reasonably necessary in the best interest of the organizational client (Model Rule 1.13). If the lawyer knows of conduct by an officer, employee, or other constituent of the organization relating to the lawyer’s representation that is a violation of a legal obligation to the organization or is a violation of law that reasonably might be imputed to the organization and is likely to result in substantial injury to the organization, the lawyer may be obligated to refer the matter to higher authority, including, if warranted by the circumstances, to the highest authority that can act on behalf of the organization as determined by applicable law (Model Rule 1.13(b)). The rule requirements are intended to protect the corporate client and could conceivably include a duty on the part of both in-house and outside counsel to report a failure to implement a litigation hold or non-compliance with e-discovery processes or other law (Model Rule 1.13(b)).

Now that courts are adopting e-discovery standards, it is reasonable to expect further developments in e-data ethics. It is not difficult to imagine that e-discovery and digital information management may become a sub-specialty for the lawyers. This could lead to a higher level of competence being required under Model Rule 1.1. Comment 5 to the rule provides that the degree of attention and preparation required by the rule depends in part on what is at stake: “major litigation and complex transactions ordinarily require more extensive treatment than matters of lesser complexity and consequence.”

Offering Clients In-House E-Data Services

E-data management and e-discovery services have become big business. A recent study reveals that commercial electronic discovery revenues could reach as high as $2.865 billion in 2007 (see Socha-Gelbmann Electronic Discovery Survey). Some law firms will be motivated to offer their clients in-house electronic discovery and related e-data services. Providing clients with nonlegal ancillary services is nothing new in the practice of law. However, the potential for ethical problems exists when a lawyer or law firm provides law-related services or controls an organization that does so. A lawyer must adhere to the rules when the law-related services performed by the lawyer are not distinct from the legal services the lawyer provides to the client (Model Rule 5.7(a)(1)). Even when the law-related services are distinct from the lawyer’s services, the lawyer must conform to the rules unless the lawyer takes reasonable steps to ensure that the client or other recipient of the law-related services knows that the services are not legal services and that client confidentiality and the other protections normally afforded by the client-lawyer relationship do not apply (Model Rule 5.7(a)(2)). Lawyers will have to manage conflicts of interest in offering e-data services to clients, particularly if there is a significant risk that the representation of the client will be materially limited by the lawyer’s responsibilities to a third person or the lawyer’s personal interests or if the lawyer enters into a business transaction with the client (see Model Rules 1.7(a)(2) and 1.8(a)).

Providing sophisticated e-data management and e-discovery services could lead to other ethical consequences. Lawyers could be held to a higher standard of competence under Model Rule 1.1. Lawyers would have to ensure that any communication offering such services is not false or misleading and does not guarantee a particular result (Model Rule 7.1). Fees and expenses charged for such services must be reasonable (Model Rule 1.5(a)). Law firm partners and in-house counsel with comparable managerial authority will need to have reasonable measures in place that provide reasonable assurance that all lawyers in the firm conform to the ethics rules (Model Rule 5.1(a)). The conduct of any nonlawyer assistants must also be compatible with the lawyer’s ethical obligations (Model Rule 5.3(a)).

Handling Client Files and Property

Managing electronic evidence is not the only challenge facing lawyers in an increasing electronic environment. As the practice of law becomes more paperless, lawyers need to know what electronic information belongs to the client or to a third person and what belongs to the lawyer (see Model Rule 1.15). A lawyer’s obligation to properly maintain, safeguard, and account for client property with the care required of a professional fiduciary will surely include certain types of electronic data. Examples include a client’s intellectual property and legal and official documents originated or maintained electronically by the firm.

The requirement that lawyers take reasonably practical steps at the end of the representation to protect the client’s interest includes turning over “papers and property to which the client is entitled” (Model Rule 1.16(d)). The rules do not dictate the form a client’s file must take. However, several ethics opinions suggest that a lawyer must consider the client’s interests and access capabilities and not just the lawyer’s electronic storage preferences in fulfilling the lawyer’s obligations under the rules (see New Hampshire Opinion 2005-06 (2006); Florida Opinion 06-1 (2006); Virginia Opinion 1818 (2005); Maine Opinion 183 (2004)). Lawyers who maintain client files in electronic format should consider delivering such documents at the end of the representation in PDF, TIFF, or other format that does not allow clients or third parties to alter the contents of the electronic documents. Retention and backup of electronic client files and duration of storage will present other ethics issues.

It is quite possible that in the future the client and the lawyer will agree that the lawyer will maintain a purely electronic file. The requirements for handling original, client-furnished documents and original legal instruments and official documents will likely extend to such items in electronic formation. Although there is no per se prohibition against storing client files electronically, the obligation to provide clients with hard copies depends on a number of factors, including the available technology, the client’s expectations, and whether there is a statute or rule that requires retention of a hard version of an original document.

Protecting Confidential Information

Issues relating to the inadvertent production of privileged and confidential client information as a result of the proliferation of e-mails and other electronic information can be expected to increase with technology. Disseminating e-data has become so facile that without proper precautions confidential content can easily find its way into the wrong hands. Sending e-mail attachments, posting files on extra-net sites, and producing e-documents in the e-discovery process all entail challenges for lawyers under Model Rule 1.6. The rule does not require that lawyers use encryption or special security measures if the method of communication affords a reasonable expectation of privacy. However, Comment 17 to Rule 1.6 warns that special circumstances may warrant special precautions. Factors to be considered include the sensitivity of the information and the extent to which the privacy of the communication is protected by law or by a confidentiality agreement. In an age of advancing technology and increased availability of encryption software, it may become more commonplace to use special security measures, such as encryption, in transmitting sensitive client confidential information electronically.

Although new federal rules provide for “quick peek,” “claw back,” and similar non-waiver agreements as protection for inadvertently produced e-discovery, lawyers should be wary of relying on these statutes, particularly with respect to non-parties and multi-state or serial litigation. These recent statutes are not intended to supersede the lawyer’s duty of confidentiality under Model Rule 1.6 or the law on the waiver of attorney-client privilege generally.

It has become recommended practice for lawyer’s to “scrub” documents to remove sensitive information before transmitting client information electronically. A recent ethics opinion suggests that it is ethically permissible for lawyers to mine for metadata in documents received from the other side (see ABA Formal Opinion 06-442).

Lawyers will also need to know how to destroy electronic information, including erasing metadata, and how to go beyond the normal deletion steps in order to accomplish secure and complete e-document destruction. Lawyers should take care to avoid importing software codes and e-data from outsiders into their client’s e-data or into the law firm’s systems. Importing software-coded documents into the firm’s computers can result in spreading unwanted information and make subsequent deletions extremely difficult.

Other Emerging Ethics Challenges

Emerging technology will challenge lawyers in other ways. It may become more difficult for lawyers to maintain a relationship of trust and confidence in a less personal electronic environment. The scope of the client-lawyer relationship will also be influenced by technology. Downloadable and online services will likely become more available to consumers at potentially less cost. The factors for judging the reasonableness of a lawyer’s fee under Model Rule 1.5 may include the medium in which the services are rendered. The same may be true regarding the reasonableness of expenses a lawyer may charge under Rule 1.5. Lawyers may find that it is harder to justify charging by the hour for services that are delivered electronically and with greater efficiency. There will be greater pressure to pass on the efficiencies of technology to consumers. This could result in some legal services being packaged and charged at a flat fee or on a task-based or value billing basis.

Emerging technology allows for greater mobility of lawyers and will likely influence the way lawyers practice as a law firm or as an association of lawyers. Advancing technology will also influence the rules relating to lawyer advertising and marketing, including the use of lawyer blogs and the means by which lawyers may engage in direct contact with prospective clients.

The ability of lawyers to have a virtual presence in a jurisdiction in which they are not admitted to practice will have consequences on rules relating to the multi-jurisdictional practice of law (see Model Rules 5.5 and 8.5). Whether the ability to practice virtually in a jurisdiction will constitute a systematic and continuous presence in the jurisdiction or whether it will be viewed as providing legal services on a temporary basis will be one of the interesting challenges facing the legal profession in the future.

Ethics rules are not intended to govern every ethical problem a lawyer encounters in the use of technology. The rules generally tell lawyers what is and what is not permissible conduct within certain parameters. Lawyers will continue to need to exercise professional judgment in analyzing the ethical implications in each situation in determining how to satisfy their professional responsibility to their clients, the court, and third parties.